Default and DMP Plan thoughts

burgervanman

How do, been lingering on the forum for a while and just thought I'd ask if my plan makes sense (based on a mix of forums and elsewhere).

After being in continuous debt over nearly two decades, I'm not getting any younger (43) and I want my debt gone by I'm 50 to concentrate on saving for retirement (beyond work pension).

I want to break the cycle even if it kills my ability to lend for 6 years

I have approx. 54k unsecured debt, roughly split between 5 loans (4 with Zopa), 1 ratesetter and the rest cards with MBNA/Newday/Halifax (2x MBNA)

(Zopa is the largest loan at 13k, the rest are all 3-5k), cards from 5-7k

Plan

1. I plan to stop paying all of them in Feb
2. Use months 1-3 to build up as much of an emergency fund as I can
3. Await the majority of defaults (3-5 months? based on internet research)
4. Activate my pre-set Stepchange DMP (I may move to self managed long term), hopefully before getting to the CCJ stage.

Maybe I have oversimplified this?, I assume zero contact with creditors is best until defaults show on credit rating?

My credit rating is low anyway due to totals of overall debts.

I have £800 in theory a month for the DMP, (Minus all budgeting) So assuming interest doesn't spiral this will be 5-6 years to pay off, by which hopefully credit rating should be getting there by then?

I'm a homeowner (mortgaged) with no intention to remortgage (small priced house) but with not much equity in the house. I pay monthly for a modest car which should last 4-5 year. (Im a DIY mechanic)

Otherwise salary from my job is stable.

Missed anything or any glaring holes in my plan?

burgervanman

To add, I was going to start with Stepchange due to the number of companies. I thought self managed will be a pain at first with so many companies.

sourcrates

Yes, good plan, I would prefer self managed, but it can take up some time with a lot of different creditors, chasing letters/emails etc, so I get that.

It really is that simple, its not rocket science, the only problem you may come across is the variation in time for defaults to be registered, it does vary company to company, apart from that, yes go for it.

burgervanman

https://forums.moneysavingexpert.com/discussion/comment/81886818#Comment_81886818

Thanks for the reply. If some of the defaults start straggling badly, I suppose it would make sense to start the DMP to avoid CCJs? I just want the larger ones to default then smaller ones (eg paypal for 1k) I could probably shift independently if I do any side hustle jobs.

Smudgeismydog

We normally suggest completing an SOA, as it can be helpful for a ‘fresh pair of eyes’ to review your income and expenditure. There may be savings to be found, or things you hadn’t thought of.

There is a link in sourcrates signature

sourcrates

Defaulting usually serves two purposes.

(1) all interest is stopped

(2) you have a clear 6 years until your credit file recovers

If you are not that bothered about your credit file, then once you get into a long term DMP, lenders usually stop interest anyway, so I would still advise waiting for the majority to default, as it also gives you time to save an emergency fund, which will come in handy, but its not written in stone, it is flexible, so you can start whenever you want too.

burgervanman

I've done an SOA based on Stepchange's questions in excel.

I've been realistic whilst trying to balance budgeting and repayment time, don't want to strange myself, but don't want to be repaying over a decade.

Assuming all goes to plan I'll have an emergency fund of around 5k prior to DMP

Income monthly after tax is £2950

Family Items (Paid by me) Monthly Average

Food Shopping inc Cleaning/Work 400
School Food (inc breakfast/lunch) 75
After School Clubs 50
Toiletries 20
Pocket Money (For Daughter) 20
Household Repairs Yearly Split Monthly) 50
Child Clothing (Yearly Split Monthly) 35
Leisure (Days out) 100
Holiday Fund
Emergency Fund Saving 25
Total 775

Individual Items

Car 191
Petrol 120
Car Ins 26
Car Tax 18
Car Maintenance (Yearly split monthly) 20
AA Breakdown 13
Life Insurance 6
Mobile Cost 30
Clothing (Myself) 30

Total 454

House Joint Bills (My share)

Non-Debt Essentials (Inc Mortgages)

Item Individual Share (Not always 50%)

Mortgage 1 220
Mortgage 2 302
Energy 185
Phone/Net 17
TV 8
House Insurance 10.55
Unemployment Cover 40
Council Tax 80
Misc (Extra I pay) 30
Water
Total 892.55

Total overall outgoings - 2121.55
Free for DMP - 828.45

Rob5342

It sounds sensible to me, that's the same sort of approach that most people here follow.

One thing I'd mention is that at some point your debts will probably be sold on and then you will have the option of setting them for a reduced amount. Some people pay less than they can afford and save the difference in preparation for that.

Stepchange can be helpful in reducing administration when you have lots of debts, but they can also make things much more difficult when it comes to doing anything outside their rigid approach, like settlement offers etc. Some people start off with them and move to managing it themselves once they are set up and more comfortable with the process.

burgervanman

https://forums.moneysavingexpert.com/discussion/comment/81886847#Comment_81886847

Thanks for this reply, I think your idea is what I will probably follow possibly a year or so into a DMP once I know where everything is in terms of defaults/payments etc.

Brie

Have you considered affordability checks with the various creditors? Or checking to see if they can provide the credit agreements? Best to do these before starting on a DMP in my opinion. No point in paying someone if they can't prove you have a CA with them or that they have knowingly given you more credit than was affordable.

burgervanman

https://forums.moneysavingexpert.com/discussion/comment/81886889#Comment_81886889

Given they are all mainstream, except Ratesetter (Metrobank) I assumed most would provide this pretty quickly. I suppose there's no harm in checking though? I'll look into the CA side tonight.